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edited by ingeborg schwenzer, ye~im atamer & petra butler
current issues in the cisg and arbitration
series editor ingeborg schwenzer
international commerce and arbitration volume 15
international publishing
TABLE OF CONTENTS
List of Contributors vii
Editorial ix
1 Legal Answers to Globalization 1
Ingeborg Schwenzer and Claudia Marti Whitebread
2 Tue CISG as Transnational Rules - Framework and Use in Practice 15
Pascal Hachem
3 Applicability of the CISG - Articles 1 and 6
Pascal Hachem
4 International Distribution Contracts and CISG
Pilar Perales Viscasillas
5 Arbitration and the CISG
Stefan Kröll
6 Challenges to Counsel in International Arbitration:
Can We Shut the Stahle Dood
Katherine Belton
7 Interpretation and Gap-Filling under the CISG
Ingeborg Schwenzer
8 Electronic Commerce within the Framework of the United
31
43
59
87
109
Nations Convention on Contracts for the International Sale of Goods 119
Petra Butler
9 Integration of the UN Electronic Communications Convention
and the United Nations Convention on Contracts for the
International Sale of Goods
Sieg Eiselen
10 Delivery of Goods under the CISG
Corinne Widmer Lüchinger
V
145
167
TABLE OF CONTENTS
11 Decisions on Conformity of Goods under Article 35 of the
UN Sales Convention (CISG): the 'Mussels Case~ Evidentiary
Standards for Lack of Conformity, and the 'Default Rule'
vs. 'Cumulative' Views of Implied Conformity Obligations
Harry M. Flechtner
12 Seller's Liability for Defects in Tide According to Articles 41
and 42 of the CISG
Axel Metzger
13 Buyer's Obligations
Florian Mohs
14 Incoterms® 2010
Jan Ramberg
15 Specific Performance
Florian Faust
16 Restrictions to Buyers' Right of Avoidance According to
the CISG and the Turkish Code of Obligations
Rona Serozan
17 Cakulating Damages for Delivery ofNon-Conforming Goods
Djakhongir Saidov
18 Interest Claims under the CISG: Uniform or Domestic
Law Approach?
Ye~im M. Atamer
vi
177
195
217
225
235
247
263
275
1 LEGAL ANSWERS TO GLOBALIZATION
Ingeborg Schwenzer and Claudia Marti Whitebread*
1.1 lNTRODUCTION
Before turning to the main subject matter of this chapter, a few words shall be said about
the development of international trade. As a result of globalization, the overall develop
ment of international trade over the last half century has been startling. Without hav
ing regard to the dramatic decrease of world merchandise exports in 2009, which in any
case was equalized in 2010, it may be useful to have a look at the trend demonstrated
throughout the last decades. World Trade Organization (WTO) figures for 2011 indicate
that merchandise export trade worldwide amounted to USD 17,779 billion and merchan
dise import trade worldwide amounted to USD 18,000 billion.1 These figures are approxi
mately 100 times more than they were 50 years ago. Tue average annual growth between
the years 2000 and 2010 was more than 5% for both exports and imports worldwide.2 Tue
highest growth is no longer found in North America and Europe, but instead it can be
found in the transition economies from different points of the globe - particularly Brazil,
China, Russia and some African countries.3 But Australia and New Zealand also display
remarkable developments: annual growth between 2009 and 2010 was 17% for Australia
and 14% for New Zealand.4
These economic developments have prompted legal answers in a variety of fields. Three of
them shall be discussed herein further detail. In the first place, dispute resolution mecha
nisms have radically changed. Second, globalization of trade triggers the globalization of
law. And third, legal education must eventually respond to these developments.
* All web pages were last accessed in November 2013. World Trade Organization, World Trade 2011, Prospects for 2012, 10 May 2012, p. 16, available at <www.wto. org/english/news_e/presl2_e/pr658_e.pdf>.
2 World Trade Organization, World Trade Report 2011, p. 20, available at <www.wto.org/english/res_e/ booksp_e/anrep_e/world_trade_reportll_e.pdf>.
3 World Trade Organization, International Trade Statistics 2011, p. 20, available at <www.wto.org/english/ res_e/statis_e/its20ll_e/itsll_world_trade_dev_e.pdf>.
4 World Trade Organization, World Trade Report 2011, p. 36.
1
INGEBORG SCHWENZER AND CLAUDIO MARTI WHITEBREAD
1.2 DISPUTE RESOLUTION MECHANISMS
In the international context, dispute resolution by domestic courts is, more often than
not, no langer an adequate solution. There are different reasons for the parties turning to
alternative dispute resolution mechanisms. In cases where none of the parties is clearly
in a superior bargaining position and is thus unable to dictate the content of the con
tract, none of these parties will agree to be subject to the jurisdiction of the other party's
domestic courts. Tue domestic courts of a third country are often not a viable alternative
either. Furthermore, alternative dispute resolution is favoured because of its con:fidential
ity, informality and the speed of the proceedings. 5 In international settings, the preferred
way of resolving disputes these days is through arbitration, 6 with mediation gaining m6re
and more importance.7
1.2.1 International Arbitration
Some :figures may shed light on these developments. Within the last two decades, the
number of arbitration cas·es handled by the twelve leading international arbitral institu
tions has more than tripled.8 Between 2005 and 2010 alone, there has been an increase of
approximately 31 % in arbitration cases.9 Empirical research suggests that more than 60%
of international contracts nowadays contain an arbitration clause.10 lt is further worth not
ing that the higher the value of a contract, the more probable it is that it contains an arbi
tration clause. For example, according to a recent survey, among the sale of goods cases
arbitrated in 2008, only 18% were valued below USD 500,000. Tue bulk (49%) ranged
between USD 1 million and 10 million. A signi:ficant number, 22%, were valued at over
USD 10 million.11
Tue worldwide shift in economic development from North America and Europe to
so-called emerging markets is mirrored with regard to developments in institutional arbi
tration. Thus, between 2005 and 2010, the Hong Kong International Arbitration Centre
(HKIAC) reported a 122% increase in arbitration matters, and the Singapore International
5 Cf S. Vogenauer, Civilfustice Systems in Europe, 2008, Questions 49.l and 51.1, available at <http://denning. law.ox. ac. uk/ iecl/pdf s/ Oxford %20Civil %20 J ustice%20Survey%20- %20Summary%20of%20 Results, %20Final.pdf>.
6 See only I. Schwenzer, P. Hachem & C. Kee, Global Sales and Contract Law, Oxford University Press, Oxford, 2012, para. 5.25.
7 N. Alexander, International and Comparative Mediation, Kluwer Law International, the Netherlands, 2009, p. 1. 8 These figures are based on the reported statistics published by the HKIAC, available at <www.hkiac.org/
index. php/ en/hkiac-statistics>. 9 Id. 10 Schwenzer et al„ 2012, para. 5.25; Vogenauer, 2008, Question 48. 11 I. Schwenzer & C. Kee, 'International Sales Law - Tue Actual Practice: Penn St. Int'L. Rev., Vol. 29, No. 3,
2011, p. 447.
2
1 LEGAL ANSWERS TO GLOBALIZATION
Arbitration Centre (SIAC) recorded a respective increase of an even greater 211 %.12 Hong
Kong and Singapore have positioned themselves as neutral institutions to arbitrate cases
particularly between Chinese and Western companies.13 Although International Chamber
of Commerce (ICC) arbitration worldwide did not increase accordingly, ICC arbitration
cases involving Asian-Pacific parties have almost doubled during the last decade, and the
number of arbitration proceedings seated in the Asia-Pacific region has increased six
fold. '" New institutions specifically target!ng Asian parties such as the Chinese European
Arbitration Centre (CEAC) in Hamburg, Germany, have emerged recently. For Middle
Eastern parties, the new Dubai International Arbitration Centre (DIAC) continues to become more and more attractive. 15
All these factual developments are the result of, and go hand in hand with, legal develop
ments in arbitration. Tue legal foundations for international arbitration have been devel
oped significantly in the second half of the 20th century, with the breakthrough being
the New York Arbitration Convention (NYC) of 1958 ensuring the enforceability ofboth
arbitration agreements and arbitral awards. 16 Today, the NYC has 149 Member States,
the few exceptions being mostly sub-Saharan African States and Pacific Islands, among
them Tonga and Samoa.17 In virtually all states contracted to the NYC, the Convention
has been implemented by domestic legislation. Suchstatutes provide a basic legal frame
work surrounding international arbitration agreements, arbitral proceedings, arbitral
awards and their enforceability.18 Many of these statutes are based on the 1985 United
Nations Commission on International Trade Law (UNCITRAL) Model Law on Inter
national Commercial Arbitration (UNCITRAL Model Law), which was partly revised
in 2006. Tue UNCITRAL Model Law is clearly supportive of the arbitral process; ninety
jurisdictions now follow this trend, and among them are Australia and New Zealand.19
Countries with less supportive national legislation on international commercial arbitra
tion, which can mainly be found in Latin America and the Middle East, are more and
more losing ground. Despite these legal developments, the fact that national courts in
1 2 TI1ese figures are based on the reported statistics published by the Hong Kong International Arbitration Centre (HKIAC), available at <www.hkiac.org/index.php/en/hkiac-statistics>.
13 J. Humphrey, 'International Arbitration: Following in the Footsteps of Globalisatioll, Navigant Disputes & Invcstigations, September 2011, p. 2, available at <www.navigant.com/-/media/WWW/Site/Insights/ 1 n ternati onal_Arbitration_Disputes_Investigations.ashx>.
l 4 Cf S. Greenberg, C. Kee & J. Romesh Weeramantry, International Commercial Arbitration, An Asia-Pacific Pcrspcctive, Cambridge University Press, Cambridge, 2011, para. 1.147.
l 5 Humphrey, 2011, pp. 2-3. 16
G.B. Born, International CommercialArbitration, VoI I, Kluwer Law International, the Netherlands, 2009, pp. 92-93. 17
Sec the list of all contracting states of the NYC provided by UNCITRAL, available at <www.uncitral.org/ u n ci tral/ en/ uncitral_ texts/ arbitration/NYConvention status.html>.
18 Born, 2009, p. 109. -19
So far, 90 jurisdictions have enacted legislation based on the UNCITRAL Model Law, see <www.uncitral. org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html>.
3
INGEBORG SCHWENZER AND CLAUDIO MARTI WHITEBREAD
some parts of the world still display a hostile attitude towards international arbitration
and continue to be reluctant to enforce arbitral agreements and foreign arbitral awards
cannotbe overlooked.20
In international arbitration, ad hoc arbitration and institutional arbitration can typi""'
cally be distinguished from each other. Whereas ad hoc arbitration is more flexible,
institutional arbitration is preferred nowadays because of its more structured and thus
more predictable character.21 Again, UNCITRAL took the lead in harmonizing the rules
applicable to international commercial arbitration. Tue 1976 UNCITRAL Arbitration
Rules were originally designed for use in ad hoc international commercial arbitra
tions. However, they also served as a basis for many arbitral institutions to develop
their own institutional rules.22 The UNCITRAL Arbitration Rules were revised in 2010
with the aim of adequately dealing with new challenges in international arbitration such
as multiparty arbitrations or joinder, as well as with the aim of enhancing procedural
efficiency.23 Consequently, many institutional rules, such as the ICC Rules, the China
International Economic and Trade Arbitration Commission ( CIETAC) Arbitration
Rules and the Swiss Arbitration Rules, have been revised recently too, all revisions hav
ing come into force in 2012. These revisions again focus on the issues of multiparty
arbitration and expedited procedures. 24
Beyond these harmonizations of legal rules, the arbitration procedure is becoming more
and more globalized because of the mere fact that lawyers, counsel and arbitrators work
ing together in deciding a case are increasingly coming from different regions of the world
with different educational, legal and cultural backgrounds.25 In this respect, some scholars
have even alluded to the emergence of a procedural lex mercatoria. 26
Tue most eminent example is the gradual convergence of the common and civil law
approaches on certain procedural issues. Three examples can be given here: the :first one
relates to document production in arbitration. Whereas in co~~mon law legal systems, dis
covery, or at least document disclosure, is a common feature, civil law legal systems have tra -
ditionally taken a different approach. In international arbitration, it is now well established
20 Cf Born, 2009, p. 146. 21 Cf Born, 2009, p. 151. 22 Cf Born, 2009, pp. 152-153. 23 See the description by UNCITRAL of the 2010 revision of the UNCITRAL Arbitration Rules, available at
<www.uncitral.org/uncitral/ uncitral_ texts/ arbitration/201 OArbitration_rules.html>. 24 Cf N. Voser, 'Overview of the Most Important Changes in the Revised ICC Arbitration Rules: ASA Bulletin,
Vol. 29, April 2011, pp. 783-820; D. Bateson, C. McKay & J. McKenzie, China: Winds of Change: CIETAC's Revision of the Arbitral Rules effective 1 May 2012, 19 May 2012, available at <www.mallesons.com/ publications/ marketAlerts/2012/Pages/Winds-of-change-CIETACs-2012-revision -of-the-ArbitrationRules-effective- l-May-2012.aspx>; M. Scherer, Revised Swiss Rules of International Arbitration enter into Force, Kluwer Arbitration Blog, 31 May 2012, available at <http://kluwerarbitrationblog.com/blog/2012/05/31/ revised-swiss-rules-of-international-arbitration-enter-into-force/>.
25 G. Kaufmann-Kohler, 'Globalization of Arbitral Procedure: Vand. J. Transnat'l L., Vol. 36, 2003, p. 1323. 26 Kaufmann-Kohler, 2003, p. 1322 et seq.
4
1 LEGAL ANSWERS TO GLOBALIZATION
that the tribunal may grant some level of discovery having due regard to the respective back
grounds and expectations of the parties.27 Another example can be found in the examination
of witnesses. In civil law legal systems, the judge is in control of taking evidence. In some
places, ethical rules even prohibit counsel from having any contact with witnesses prior to
the hearing. Thus, witnesses are questioned by the court, whereas in common law legal sys
tems, it is counsel's task to examine the witnesses. In international arbitration, the common
Jaw approach prevails; as otherwise, counsel coming from a civil law background would be
prejudiced.28 Tue last example relates to the maxim iura novit curia: that means whether the·
parties must prove the law, as is the case in common law jurisdictions, or whether the court
or the tribunal is free to establish and assess the content of the law, as is the case in civil law
countries. Even if there are still differences, today there are clear tendencies towards gradu
ally discarding the iura novit curia principle in international arbitration.29
1.2.2 International Mediation
Additionally, the last several decades have seen the emergence of mediation as an instru
ment of international dispute resolution. Modem mediation gathered momentum in the
I 970s in the United States, in the 1980s in Australia, the United Kingdom, Canada and
New Zealand and, finally, in the 1990s in European civil law jurisdictions.3° For the most
part, the same arguments are put forward in favour of mediation as for arbitration. More
over, mediation is considered to be more cost-effective, in particular when compared with
arbitration.31 Finally, mediation is less likely to disrupt a long-term relationship between
the parties than arbitration is, let alone litigation.32 Thus, nowadays many contracts con
tain the so-called 'multi-tiered' dispute resolution clauses (MDR clauses) under which the
parties must first turn to mediation or conciliation before they move on to arbitration. 33
Jn the meantime, institutionalization has also reached mediation. In the 1990s, interna
tional commercial arbitration institutions, such as the ICC in Paris and the London Court
27 Kaufmann-Kohler, 2003, pp. 1327-1328. 28 Cf Kaufmann-Kohler, 2003, p. 1329. 29 See, in that regard, the decision of the Swiss Federal Supreme Court of 20 March 2007, 4A_3/2009, consid.
7 .1„ where the court ruled that it constitutes a violation of the parties' right to be heard when an arbitral tribunal builds its decision, without consulting the parties, on a legal basis which has not been addressed before.
30 Alexander, 2009, p. 53; N. Alexander, Global Trends in Mediation, 2nd edn, Kluwer Law International, the Netherlands, 2006, p. 1. Further, mediation as preferred dispute resolution mechanism has a longstanding tradition in Asia, see only S.E. Hilmer, Mediation in the Peoples' Republic of China and Hang Kong (SAR), Eleven International Publishing, 2009, p. 3.
3 l Alexander, 2009, p. 49. 32 Cf H. Smith, Pros and cons of common ADR processes, December 2007, pp. 2, 3, available at <www.
herbertsmith.com/NR/rdonlyres/1CBC5541-06B6-4D4E-A03C-8D3846868D10/0/prosandcons_ ADR0508.pdf>.
33 Alexander, 2009, p. 25.
5
INGEBORG ScHWENZER AND CLAUDIO MARTI WHITEBREAD
of International Arbitration in London as well as national alternative dispute resolution
organizations, began to develop their cross-border mediation services and facilities.34 Just
like with arbitration, over the last few years the number of international mediation cases
has grown well above average in Singapore35 and Hong Kong.36
Regarding the legal regulation of international mediation, it was again UNCITRAL who
took the lead. In 1980, UNCITRAL had already developed the UNCITRAL Conciliation
Rules. In 2002, the UNCITRAL Model Law on International Commercial Conciliation
was passed. Although both sets of rules were not as successful as their arbitration coun
terparts, they have contributed, to a great extent, to the evolving harmonization between
mediation laws and rules worldwide.37
Although mediatiön is certainly on the rise internationally, its drawback is still its non
binding nature.38 This non-binding nature relates not only to the mediation dause itself
but also to the mediated settlement agreement. Tue latter has legal force no stronger than
any ordinary contractual agreement. 39
There is no instrument relating to mediation that is equivalent to the NYC which facilitates
international recognition and the enforcement of arbitration clauses and arbitral awards.
Neither the 2002 UNCITRAL Model Law on International Commercial Conciliation, nor
the more recent 2008 European Union Directive on Certain Aspects of Mediation in Civil
and Commercial Matters contain clear rules for the easy recognition and enforcement of
mediation dauses and mediated settlement agreements. They both simply provide that
settlement agreements should be binding and enforceable.40 This must be regarded as a
major disadvantage for the further globalization of mediation.41
34 Alexander, 2009, p. 56. 35 There has been an increase of the number of mediation cases referred to the Singapore Mediation Centre
between July 2005 and April 2010 from 1,290 to 1,500. These figures are based on the statistics provided by the Singapore Mediation Centre, available at <www.mediation.corn.sg/mediation_statistics.htm>. See further L. Seng Onn, Non-Court Annexed Mediation in Singapore, available at <http://jrn21.judiciary.gov.ph/ forum_icsjr/ICSJR_Singapore%20%28L%200nn%29.pdf>.
36 Tue number of mediation cases handled per year by the Hong Kong International Arbitration Centre has increased between 2007 and 2010 from 15 to 100. These figures are based on the statistics of the HKIAC published in its annual reports available at <www.hkiac.org/index.php/en/annual-report>.
37 In 21 jurisdictions, mediation legislation based on the UNCITRAL Model Law on Commercial Conciliation is currently enacted, see <www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2002Model..):onciliation_status.html>. Various institutions have adopted the wording of the UNCITRAL Conciliation Rules for their own institutional rules, see Alexander, 2009, pp. 339-340.
38 Cf M.L. Moses, The Principles and Practice of International Commercial Arbitration, Cambridge University Press, Cambridge, 2008, p. 13.
39 See M.C. Hilgard & J. Wendler, 'Enforcement: in P. Barclay (Ed.), Mediation Techniques, International Bar Association, 2010, pp. 193, 194.
40 Art. 14 UNCITRAL Model Law on International Commercial Conciliation; resp. Art. 6 EU Directive 2008/52/ on Certain Aspects ofMediation in Civil and Commercial Matters, OJ 2010 L 136.
41 See also Alexander, 2009, p. 1.
6
1 LEGAL ANSWBRS TO GLOBALIZATION
I.3 GLOBALIZATION OF LAW
Looking beyond dispute resolution mechanisms, the globalization of trade also neces
sitates globalization of the law. It goes without saying that different domestic laws form
obstacles for international trade as they increase transaction costs considerably for mar
ket participants.42 Several surveys conducted during the last several years reveal that
traders themselves believe that differences 'in contract law are one of the main obstacles
for conducting cross-border transactions.43 These include diffi.culties in :finding out about
the provisions of applicable contract law, obtaining legal advice, negotiating the appli
cable law as well as adapting standard terms to different domestic laws.44 Thus, trade has
always been the driver for the harmonization and uni:fication of contract law in particular
since the 19th century (beginning on a domestic level), moving to the international level
in the 20th century.
Since there is a considerable imbalance in the accessibility of domestic legal systems, in
practice only a few developed domestic laws prevail in choice of law clauses, irrespec
tive of whether they are suitable for adequately governing international contracts. This
leads to the conclusion that there is an urgent need for uniform rules on general contract
law to be established, encompassing all conceivable relevant questions in a contractual
business-to-business (b2b) relationship.
1. 3.1 UN Convention on Contracts for the International Sale of Goods
It was against this exact background that UNCITRAL started working on the unification
of sales law in 1968, culminating in the Convention on Contracts for the International
Sale of Goods (CISG), which entered into force on 1January1988. Tue CISG proved tobe
the most successful private international law Convention worldwide. Today, there are 80
contracting states with the number continuously increasing.45 According to WTO trade
42 Cf E. McKendrick, 'Harmonisation of European Contract Law: Tue State We Are Ill, in S. Vogenauer & S. Weatherill (Eds.), The Harmonisation of European Contract Law, Implications for European Private Laws, Business and Legal Practice, Hart Publishing, 2006, pp. 14-15.
'13 See only S. Vogenauer & S. Weatherill, 'Tue European Community's Competence to Pursue the Harmonisation of Contract Law - An Empirical Contribution to the Debate: in Vogenauer & Weatherill, 2006, p. 126.
44 Schwenzer et al., 2012, para. 5.32 et seq. 4 5 111e list of all current contracting states of the CISG provided by UNCITRAL is available at <www. uncitral.
org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html>.
7
INGEBORG SCHWENZER AND CLAUDIO MARTI WHITEBREAD
statistics, nine of the ten largest export and import nations are contracting states, with the
UK being the only exception.46 lt can be assumed that approximately 80% of international
sales contracts are potentially governed by the CISG.47
Moreover, a truly great success is the strong influence the CISG has exerted at both
the domestic and international level. Tue Uniform Act on General Commercial Law
enacted by the Organization for the Harmonization of Business Law in Africa ( OHADA)
is in many respects, at least in its sales part, practically a transcript of the CISG. Tue
UNIDROIT (International Institute for the Unification of Private Law) Principles of
International Commercial Contracts (PICC), the Principles of European Contract Law
(PECL), the Draft Common Frame of Reference (DCFR) and now the Draft Common
European Sales Law (CESL) are all modeled on the CISG. Furthermore, the European
Commission's Consumer Sales Directive heavily draws on the CISG.48 Similarly, the Sale
of Goods Actin the Nordic Countries, the modernized German Law of Obligations, the
Contract Law of the People's Republic of China and other East Asian Codifications, and
the majority of the recent post-Soviet codifications in Eastern Europe, Central Asia and
in two of the Baltic States, build on the CISG. Likewise, the draft for a new Civil Code
in Japan follows the scheme of the CISG.49 lt is reported that in developing countries the
CISG is used to teach traders the structures of contract law so as to improve their level
of sophistication. 50
1.3.2 Other UNCITRAL Endeavours
In addition to the CISG, UNCITRAL has embarked upon the unification of many other
areas of international trade. Some of these instruments again touch upon various ques
tions of general contract law, 51 especially the 197 4 Convention on the Limitation Period
in the International Sale of Goods, the 1983 Uniform Rules on Contract Clauses for an
46 Cf World Trade Organization, International Trade Statistics 2011, p. 24. 47 See P. Schlechtriem & I. Schwenzer, in 1. Schwenzer (Ed.), Schlechtriem & Schwenzer, Commentary on the
Convention on the UN Convention on the International _5ale of Goods (CISG), 3rd edn, Oxford University Press, Oxford, 2010, Introduction 1.
48 See 1. Schwenzer & P. Hachem, 'Tue CISG - A Story ofWorldwide Success: in J. Kleineman (Ed.), CISG Part II Conference, Stockholm Centre for Commercial Law, Juridiska Institutionen, 2009, pp. 123, 124.
49 I. Schwenzer, 'Regional and Global Unification of s;les Law: EJLR, Vol. 13, Nos. 3-4, 2011, pp. 372-373. 50 Schwenzer et al., 2012, para. 3.21. 51 1974 Convention on the Limitation Period in the International Sale of Goods; 1978 United Nations Conven
tion on the Carriage of Goods by Sea - Tue 'Hamburg Rules'; 1980 United Nations Convention on International Multimodal Transport of Goods; 1983 Uniform Rules on Contract Clauses for an Agreed Sum Due upon Failure of Performance; 1988 United Nations Convention on International Bills ofExchange and International Promissory Notes; 1991 United Nations Convention on the Liability of Operators ofTransport Terminals in International Trade; 1992 UNCITRAL Legal Guide on International Countertrade Transactions; 1992 UNCITRAL Model Law on International Credit Transfers; 1995 United Nations Convention on
8
1 LEGAL ANSWERS TO GLOBALIZATION
Aareed Sum Due upon Failure of Performance, the 1992 UNCITRAL Legal Guide on tJ
International Countertrade Transactions and the 2005 United Nations Convention on the
Use of Electronic Communications in International Contracts. Despite these advances in
globalizing international commercial law, important areas are still governed by domestic
contract law.
J .3.3 Other Initiatives for Establishing a General Contract Law
Over the last 30 years, there have been numerous endeavours around the globe to establish
sets of internationally uniform contract law.
1.3.3.l UNIDROIT
On a global scale, UNIDROIT has engaged in elaborating PICC. Whereas the 1994 ver
sion of the PICC mostly covered the areas already dealt with under the CISG as well as
validity issues, the 2004 version also addressed the authority of agents, contracts for the
benefit of third parties, set-off, limitation periods, assignment of rights and contracts, and
the transfer of obligations. Finally, the 2010 version contains a chapter on illegality and
a section on conditions as well as detailed rules on the plurality of obligors and obligees
and on the unwinding of contracts.52 Thus, the PICC 2010 now cover all areas that are
perceived to concern contract law in most legal systems. Still, the practical importance of
the PICC is rather limited, as they are an opting-in instrument, applicable only bythe par
ties' choice oflaw.53 Surveys suggest that in international commercial contracts the PICC
are chosen in only 0.6% of all cases.54 Furthermore, with the PICC being soft law, many
domestic courts will not even accept such a choice oflaw.55
Independent Guarantees and Stand-by Letters of Credit; 1996 UNCITRAL Model Law on Electronic Commerce with Guide to Enactment, with additional Art. 5bis adopted in 1998; 2001 UNCITRAL Model Law on Electronic Signatures with Guide to Enactment; 2001 United Nations Convention on the Assignment of Receivables in International Trade; 2005 United Nations Convention on the Use ofElectronic CommunicaLions in International Contracts; 2007 UNCITRAL Legislative Guide on Secured Transactions; 2007 Promoting confidence in electronic commerce: legal issues on international use of electronic authentication and signature methods; 2008 United Nations Convention on Contracts for the International Carriage of Goods \Vholly or Partly by Sea - the Rotterdam Rules; 2010 UNCITRAL Legislative Guide on Secured Transactions: Supplement on Security Rights in Intellectual Property.
52 Schwenzer et al., 2012, paras. 3.48-3.50. 53 Cf R. Michaels, in S. Vogenauer & J. Kleinheisterkamp (Eds.), Commentary an the Unidroit Principles of
International Commercial Contracts (PICC), Oxford University Press, Oxford, 2009, Preamble para. 5. 54 Sec Greenberg et al., 2011, para. 3.140. 55 Iv!ichaels, in Vogenauer & Kleinheisterkamp, 2009, Preamble para. 7.
9
INGEBORG SCHWENZER AND CLAUDIO MARTI WHITEBREAD
1.3.3.2 Regional Endeavors
On a regional level, a number of initiatives have been taken to harmonize or unify
contract law.
Several approaches can be found in Europe that are all aimed at implementing a
European Civil Code or at least a European Contract Law. First and foremost, the PECL
shall be mentioned here. Starting with preparatory work in the 1980s, the PECL were
published in three parts (1995, 1999, 2003). Part I covers performance, non-performance
and remedies; Part II covers formation, agency, validity, interpretation, content and effects
of contracts; and Part III covers plurality of parties, assignment of claims, substitution
of the debtor, set-off, limitation, illegality, conditions and capitalization of interest. Tue
PECL have a clear European focus, but also take into account the US-American Uniform
Commercial Code as well as the Restatements on Contracts and Restitution.56 Like the
PICC, the PECL are so-called soft law. Although the parties, at least in arbitration, may
choose to follow the PECL, to date there are no reported cases where this has occurred.
More recently in 2009, the Study Group on a European Civil Code and the Research
Group on EC Private Law published the DCFR. In contrast to the PICC and PECL, the
DCFR not only addresses general contract law but considers virtually all matters typi
cally addressed in civil codes except family law and laws of inheritance. Tue DCFR was,
however, met with severe criticism not only with regard to the project's general idea57 but
especially with regard to drafting and style58 as well as speci:fic solutions found in the area
of general contract and sales law. 59
Building on the DCFR, the European Commission published a proposal for a Regulation
of the European Parliament and of the Council on a Common European Sales Law ( CESL)
in October 2011. Thus, the idea of establishing a general contract law on the European
level was not pursued anymore, but rather narrowed down to sales law. Tue content of
the CESL is almost identical to that of the CISG and the UN Limitation Convention with
additional provisions on defects of consent, unfair contract terms, pre-contractual infor
mation duties and contracts tobe concluded by electronic means. Most notably, in ccp
trast to the CISG, the CESL not only applies to b2b contracts but is in fact primarily aimed
at contracts concluded with consumers. Tue CESL, too, is an opting-in instrument.60 Tue
future of this instrument is yet to be determined.
56 0. Lando & H. Beale, Principles of European Contract Law, Parts I and II, Kluwer Law International, the Netherlands, 2000, p. xxvi.
57 Schwenzer et al., 2012, para. 3.63. 58 U. Huber, 'Modellregeln für ein Europäisches Kaufrecht: ZEuP, Vol. 16, 2008, p. 744. 59 I. Schwenzer & P. Hachem, 'Drafting New Model Rules on Sales: CFR as an Alternative to the CISG?: EJLR,
Vol. 11, 2009, p. 460 et seq. 60 Fora general overview of CESL, see D. Staudenmayer, 'Der Kommissionsvorschlag für eine Verordnung zum
Gemeinsamen Europäischen Kaufrecht: NJW, Vol. 64, 2011, pp. 3491-3498.
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1 LEGAL ANSWERS TO GLOBALIZATION
In Europe, a few more private initiatives undertook similar projects, among them the
Academy of European Private Lawyers that issued the Preliminary Draft for a European
Code (2001) and the Trento Common Core Project.61
In Africa, first regard is tobe given to the Organization for the Harmonization of Afrlcan
Business Affairs' (OHADA) Uniform Act on General Commercial Law (1998, amended in
2011 ). As mentioned above, the sales part of this Act strongly relies on the CISG, although
it contains certain modifications. In addition to this Act, OHADA initiated moves towards
establishing a Uniform Act on Contract Law. A draft was prepared in cooperation with
UNIDROIT and published in 2004, heavily drawing on the PICC. For the time being, the
Future of this project is uncertain. Considerations for the harmonization of contract law
. based on the current international experience are also voiced in the framework of the East African Community.62
Another recent private initiative aiming at the elaboration of Principles of Asian Contract
Law (PACL) has been undertaken in Asia since 2009. Among others, participants come
from Cambodia, Vietnam, Singapore, the People's Republic of China, Japan and South
Korea. Until today, the chapters on formation, validity, interpretation, performance and
non-performance of the contract have been finalized.63
Likewise, in Latin America, general contract principles have been developed since 2009
within the framework of the Proyecto sobre Principios Latinoamericanos de Derecho de los
Contratos hosted by a Chilean university. Tue countries covered by this framework up until
now are Argentina, Uruguay, Chile, Colombia and Venezuela. However, the European approach seems tobe considered as well.64
Among these initiatives, a trend aiming at building common regional law by using global
texts also exists. This can be seen, for instance, in the framework of the North American
Free Trade Agreement (NAFTA) and now also in the framework of the Dominican
Republic - Central America Free Trade Agreement (DR-CAFTA).65
6 l Cf G. Gandolfi, The Academy of European Private Lawyers and the Pavia Draft of a 'European Contract
Code', available at <http://ec.europa.eu/ consumers/ cons_int/ safe_shop/fair_bus_pract/ cont_law/ stakehold ers/5-20.pdf>.
62 Cf Schwenzer et al., 2012, paras. 3.39-3.41. 63 For further information on PACL, see <www.fondation-droitcontinental.org/jcms/c_7718/projet-commun
d e-droit-des-contrats-en -asie-du -sud-est>. 6
4 For the description of this project, see <www.fundacionfueyo.udp.cl/archivos/Proyecto%20sobre%20 Principios%20latinoamericanos%20de%20derecho%20de%20los%20contratos.pdf>.
65 Cf S. Zamora, 'NAFTA and the Harmonization of Domestic Legal Systems: Tue Side Effects ofFree Trade: 12 Ariz. J. Int'l & Camp. L., 1995, Vol. 401, pp. 401-428; see also C.F. Jackson, 'Tue Free Trade Agreement of the Americas and Legal Harmonizatioll, ASIL Insights, June 1996, available at <www.asil.org/insight3.cfm>.
11
INGEBORG SCHWENZER AND CLAUDIO MARTI WHITEBREAD
1.3.3.3 International Chamber of Commerce
For decades, important contributions to the harmonization of international trade law
have emanated from the ICC. As far back as 1936, the ICC published the International
Commercial Terms (Incoterms®). Their latest version, the eighth edition, dates to 201.0.
Although in many sales contracts Incoterms are agreed upon and are thus of utmost prac
tical importance, Incoterms cover only a small fraction of the parties' obligations in an
international sales contract. With the Uniform Customs and Practice for Documentary
Credits (UCP), the ICC has created another important instrument to facilitate interna
tional trade. Finally, the ICC provides innumerable model contracts and clauses for use in
various types of international commercial transactions.66
1.3.3.4 Interim Results
All these more-or-less regional projects and initiatives are ample proof of the urgent
need for uniform rules on general contract law at an international level, a need that has
resulted from the development of global trade. Regional endeavours to harmonize and
unify general contract law cannot, however, fulfil the needs of international trade on
a global scale.67 Rathe~, different legal regimes in different regions lead to fragmenta
tion. Instead of saving transaction costs and thus facilitating cross-border trade, inter
national contracting may become even more complicated. Regional unification adds a
further layer in addition to domestic rules and the well-established instrument of the
CISG. Additionally, in many instances, not only does the terminology used in the gen
eral contract law instruments differ from that used in the CISG ( which in itself leads
to confusion); there will also frequently be contradicting solutions to one and the same
legal problem. Finally, regionalization of legal systems reduces the number of cases
decided on a truly international level, and hence has a negative impact on the predict
ability of the outcomes. Tue <langer exists that the ongoing regionalization of contract
law will lead to a regional focus on the various instruments and their interpretation,
which would capture attention for decades and thus leave hardly any capacities, room,
time or energy for a truly global approach.
Therefore, against this background, for the 45th session of UNCITRAL, Switzerland
has submitted a proposal on the desirability and feasibility of possible future work by
UNCITRAL in the area of international contract law. This proposal was supported by
the majority of national delegates on 6 July 2012. In this way, UNCITRAL will embark
on investigating further harmonization in this important field of commercial law.
66 See Schwenzer et al., 2012, paras. 3.69-3.72. 67 See also McKendrick, 2006, p. 29. ·
12
1 LEGAL ANSWERS TO GLOBALIZATION
LEGAL PROFESSION AND EDUCATION
Globalization has, in the meantime, also reached the legal profession. In line with the
growth of international trade in goods, there has been sustained growth of legal services
markets over the last several decades. This has resulted in a growing number of multina
tional law firms with vastly expanded numbers oflawyers.68 In 2009, the top ten law firms
had offices in more than ten countries and seven of them had more than 70% of their law
yers placed outside the main offices. Also, the overall number oflawyers employed by the
top level firms has risen sharply; today, over 30 law firms employ more than 1,000 lawyers,
with the top-ranking US firm employing almost 4,000. There is a clear nexus between the
size of a law firm and the internationalization of its practice.69
cllie expansion of international law firms illustrates two perspectives: the first one can
be labeled the 'follow your dient' model, where law firms mostly spread to developing
countries in which large multinational companies are operating. Prominent examples
are China, Hong Kong and Singapore. Another pattern of expansion can be found in
developed economies where foreign-owned law firms expand with the intent of equally
servicing the local legal market.70 A recent phenomenon is the increased outsourcing
of legal business. This does not only concern administrative business processes, but has
reached the core business related to legal work, such as document review, litigation sup
port and legal research. India is reported tobe the main destination for such outsourcing
of legal services.71
The question arises whether young lawyers ,are truly equipped to meet the challenges of
the globalization of their profession. This relates to their legal education. In most coun
tries, law schools still focus on teaching domestic law. However, there are certain ten
dencies towards internationalization oflegal education. It has been, and still is, common
for many young lawyers of civil law jurisdictions to continue their studies in a common
law country with the aim of receiving an LLM (Master of Laws) degree. During the
last few decades, numerous exchange programs have been initiated that are sometimes
or often combined with the possibility of undertaking a double degree. International
mooting competitions such as the Jessup Moot and the Willem C. Vis International
Commercial Arbitration Moot attract thousands of students from all over the world
68 Wor!d Trade Organization, Council for Trade in Services, Legal Services Report 2010, 14 June 2010, S/C/ W/318, p. 3.
69 \'\TorJd Trade Organization, Council for Trade in Services, pp. 2-3. 70 Wor!d Trade Organization, Council for Trade in Services, p. 5. 71 Wor!d Trade Organization, Council for Trade in Services, pp. 6-7.
13
INGEBORG SCHWENZBR AND CLAUDIO MARTI WHITEBREAD
annually. 72 Curricula of many law schools nowadays feature courses in international
and/ or comparative law and stimulate legal language skills with the focus naturally
being on today's lingua franca English.
Despite all these endeavours, however, legal education is still orientated towards pro
ducing lawyers specialized in their home jurisdiction and not those who are more ver
satile in the global legal market. lt cannot be disputed that certain fields oflaw still are
and will be nationally confined, such as many areas of public law and criminal law as
well as property law, family law and the law of inheritance. These fields still require pre
dominantly domestically educated lawyers. However, in the long run, a genuine educa
tion of international lawyers must evolve on a comparative basis. Such a denationalized
education should at the same time be delocalized, bringing together students from all
over the world and thus equipping them with a truly cross-cultural and globalized
learning experience.
1. 5 CONCLUSION
Laws tend not to be the engine room of an economy; rather, they follow some steps
behind. International trade, or perhaps more accurately, global trade, is no different.
Tue globalization of trade transforms law. Industrialization at the beginning of the 19th
century precipitated the codification and rationalization of law worldwide at the level of
nation states. Global trade in the 21st century is moving us towards the anationalization
and delocalization of law, the legal profession and finally, legal education.
72 Cf T. Hutchinson, 'Tue Transnational Lawyer: GATS, Globalisation and the Effects on Legal Education', Austl. & N.Z. J.L. & Educ., Vol. 11, 2006, p. 101.
14